Name (ID): Sofian - - (A3140345)

Mid-Term Exam - Investment Analysis and Management

Highlight of IDX Composite in two decade and the review in 2014

Introduction
The IDX Composite, known as Jakarta Composite Index (JCI) in the world, is an index of
all stocks that trade on the Indonesia Stock Exchange. Indonesia Stock Exchange (Indonesian:
Bursa Efek Indonesia) is a stock exchange based in Jakarta, Indonesia. It was previously known
as Jakarta Stock Exchange (JSX) before its name changed in 2007 after merging with Surabaya
Stock Exchange (SSX). As end of 2013, the Indonesia Stock Exchange had 483 listed companies
with a combined market capitalization of $351,6 billion.
As you recognize above, the market capitalization in JCI is not big if you compare with
the US Stock Exchange like Dow Jones or NASDAQ, even if you compare the market
capitalization perspective, The JCI market capitalization just as big as one company listed in US
Stock Market, Microsoft Corporation. But beside the market capitalization, JCI has a good track
record about the growth rate, for example the growth rate within 10 year, 2003 2013, has
increased approximately 500%. In the worlds side, JCI had been known as the 2nd best
performing stock market in the world and the best performing stock market in the Asia Pacific in
2009 (cited from Bloomberg news). The JCI index increased 87% in 2009. This means Indonesia
has a great capability to recover their economy from US financial crisis in 2008, which made JCI
index fall down about 50% in 2008. Nowadays, in September 8, 2014, JCI reaches the highest
record at the level 5.262. Based on the potential growing rate and recovery rate, JCI become one
of high potential Investment.
Based on history of JCI for one decade, no doubt that JCI obviously become a high
potential investment. But, what factors that affect JCIs movement? According stock market
investments in general not only have a high risk but also have a high risk. Whether JCI will
continue their up-trend in the future? What the important factor that investors must be aware in
JCI? What is the current factors that affected JCI in 2014?
History of IDX Composite
After stalled since 1956, the Jakarta Stock Exchange reactivated on 10 August 1977. At
that time, the Jakarta Stock Exchange or the Securities and Exchange Commission managed by
the Executive Agency Capital Markets (now the Capital Market Supervisory Agency), an agency
under the Ministry of Finance. Until 1987, the developments of the Jakarta Stock Exchange can
be recognized very slowly, with only 24 issuers were recorded and the average daily transaction
value of less of 100 million rupiah (at that time equal to US$50,000). The slow growth ended the
following year when government issued deregulation in banking and capital markets through
Pakto 1988 (Government and Central bank Policy about business licensing new bank).

With the rapid growth and dynamic, stock needs to be taken more seriously. To keep
objectivity and prevent the possibility of conflict of interest function, operational guidance and
exchanges must be separated and developed with the approach more professional. Finally, the
government decided its the time to do privatization exchanges. So the end of 1991 established
the Jakarta Stock Exchange and unveiled by the Ministry of Finance on July 13, 1992.
Growth stock exchanges in subsequent years become increasingly faster, especially since
system made automation of trading on May 25, 1995. All trading indicators such as value,
volume and frequency of transactions showed tremendous growth. On 2008, the average
transaction value has reached over 4.4 billion rupiah per day (equivalent to US$ 458 million at
that time). Though in 2008 there was a financial crisis in the United States that affects all
exchanges in the world including Indonesia, but the average value of transactions per day is still
above the 4 billion rupiah. Those numbers increased enormously when compared with earlyonset privatization of the stock exchange or prior to the enforcement of trade automation. In
1994, the mean average transaction value amounted to only 104 billion per day. This means that
within a period of 15 years average daily turnover has increased by approximately 4,000%.
Along with the development of the market and demands for improving efficiency and
power competitiveness in the region, the effective date of December 3, 2007 officially IDX
Jakarta merged with the Surabaya Stock Exchange and renamed the Stock Exchange Indonesia.
IDX Composite movements history
IDX Composite has a official website (http://www.idx.co.id) that provide any data about
Stock Exchange in Indonesia. The available data recorded from 1994 until now. Here is the table
below about the development history of JCI in 1994- 2013:
Table 1
Developments in Indonesia Stock Exchange
Years 1994 2013
Year

Average of Daily Transaction

Volume
Value
(Frequency
(Rp
(Rp
thousand
Million) Billion)
times)

IDX Composite
Highest

Lowest

Close

Market
Capitalization
(Rp Billion)

Numbers
of
Issuers

1994 21,60

104,00

1,5 612,89

447,04

469,64

104,00

217

1995 43,30

131,50

2,5 519,18

414,21

513,85

152,00

238

1996 118,60

304,10

7,1 637,43

512,48

637,43

215,00

253

1997 311,40

489,40

12,1 740,83

339,54

401,71

160,00

282

1998 366,90

403,60

14,2 554,11

256,83

398,04

176,00

288

1999 722,60

598,70

18,4 716,46

372,32

676,92

452,00

277

Year

Average of Daily Transaction

Volume
Value
(Frequency
(Rp
(Rp
thousand
Million) Billion)
times)

IDX Composite
Highest

Lowest

Close

Market
Capitalization
(Rp Billion)

Numbers
of
Issuers

2000 562,90

513,70

19,2 703,48

404,12

416,32

260,00

287

2001 603,20

396,40

14,7 470,23

342,86

392,04

239,00

316

2002 698,80

492,90

12,6 551,61

337,48

424,95

268,00

331

2003 967,10

518,30

12,2 693,03

379,35

691,90

460,00

333

2004 1.708,60

1.024,90

15,5 1.004,43 668,48

1.000,23 680,00

331

2005 1.653,80

1.670,80

16,5 1.192,20 994,77

1.162,64 801,00

336

2006 1.805,50

1.841,80

19,9 1.805,52 1.171,71 1.805,52 1.249,00

344

2007 4.225,80

4.268,90

48,2 2.810,96 1.678,04 2.745,83 1.988,00

383

2008 3.282,70

4.435,50

55,9 2.830,26 1.111,39 1.355,41 1.076,00

396

2009 6.089,90

4.046,20

87 2.534,36 1.256,11 2.534,36 2.019,00

398

2010 5.432,10

4.800,97

105,8 3.786.09 2,475.60 3.703,51 3.247,10

420

2011 4.872,67

4.953,20

113,5 4,193.44 3.292.54 3.821,92 3.537,29

440

2012 4.283,59

4.537,05

121,7 4.375.16 3.681,11 4.316,68 4.126,99

462

2013 5.502,69

6.238,21

153,7 5,225.59 3,994.46 4.274,17 4.219,02

483

Source: http://www.idx.co.id (Official website of Indonesia Stock Exchange)

From the table above, the transaction activity and the JCI showed a dramatic increasing.
In late 1994, JCI still remains at 469.64. Despite JCI had declined during the economic crisis hit
Indonesia in 1997, but in the era of the 2000s, JCI experiencing tremendous growth. On May,
2013, JCI reached the highest level in the history of the Indonesian capital market was closed at
5,225.59, an increase of 1012,68% compared to the close of 1994.

This graphic shows the daily average stock in value, JCI close price and the Market
Capitalization in value (Rp):
Graphic 1
Jakarta Composite Index Graphic in 1994 - 2013

Jakarta Composite Index Graphic

in 1994-2013
7,000.00

6,000.00

5,000.00

4,000.00

3,000.00

2,000.00

1,000.00

Daily Average Stock (Value -Rp Billion)

IDX Composite (Close Price)
Market Capitalization (Rp Billion)
2 per. Mov. Avg. (IDX Composite (Close Price))
(Processed from the table 1)

In this graphic we can see that there is a increasing pattern from 2002 2013. The JCI
increase following together with Daily Average Stock and Market Capitalization, this means the
JCI and the others two have proportional movement. In this condition, market will make a
bullish trend until reach the saturation point and become bearish trend, except there is an
extraordinary incident, like US Financial crisis in 2009. This hypothesis is supported by the
current market condition, until today (November 28, 2014) JCI closed at 5,149.89.

Factors affecting JCI based on journal research

Many theories and previous studies which revealed that the movement of
JCI is influenced by several factors including factors from abroad (External) and factors derived
from the domestic (internal). Factors that come from outside the country can come from another
State of foreign stock indices (Dow Jones, HSI, NIKKEI, KOSPI), the trend of oil price in the
world, gold price and foreign market sentiment. While the factor of domestic origin may come
from the foreign exchange, interest rates of Central Bank (SBI) and inflation in the country, even
the politic situation can affect JCI.
There is a research about the Factors affecting movement JCI in Indonesia Stock
Exchange with time scope in 2004 2009. Factors in that research using foreign stock exchange
and the CPO price as the external factors, Inflation, foreign exchange and interest rates of
Central Bank as the internal factors. The analysis used in this research is a descriptive and
inferential test using SPSS. Data processing is used by testing the classic assumption and
multiple linear regressions to do a comparison of two methods, Enter and Backward methods. As
the result, the external factors that affecting JCI are Dow Jones (23.59%), KOSPI (4.9%), HSI
(11.79%), KLSE (41.26%) and Oil Prices (12.32%) and the inflation (2.89%) and the rate of SBI
(3.25%) as the internal factors. The external factors affect 93.86% and internal factors affect
6.14% to the JCI.
Foreign Ownership affecting JCI
In that research, the external factors more affect JCI than internal factors. In fact, JCIs
heavy dependence to the role of foreign investors is a reality that must be recognized. The
average percentage of Total Trade Value Trading (Domestic & Foreign) 1997 2014 in JCI is
described in table 2:
Table 2
The average percentage of Total Trade Value Trading (Domestic & Foreign) 19972014* in JCI
Foreign (%)
Local (%)
Foreign (%)
Local (%)
Year
Year
52%
48%
30%
70%
1997
2006
42%
58%
22%
78%
1998
2007
35%
65%
27%
73%
1999
2008
20%
80%
25%
75%
2000
2009
11%
89%
31%
69%
2001
2010
8%
92%
31%
69%
2002
2011
28%
72%
43%
57%
2003
2012
41%
59%
57%
43%
2004
2013
41%
59%
59%
41%
2005
2014*
(source: http://www.ojk.go.id/ the official website of Financial Services Authority)
*)First week of November 2014

From the table 2, in the 1997 Foreign investors have strong position to maintain JCI, but
after several years, in the late 2000 2003 domestic investors show the strong position of
dominating JCI. In recent year, the average proportion between domestic & foreign investors
becomes 4:6, respectively. This means the foreign investors have an important role to keep
markets liquidation balance.
Review of JCIs movement in 2014
As we know from the history and statistic data above that JCI affected by many factors,
including external factors and internal factors, also cannot be separated from role of foreign
investor in JCI. In 2014, there are some significant moments that increasing JCI to the above
5,000 point. Here the table of development in JCI January October 2014:
Table 3
Developments in Indonesia Stock Exchange
January October 2014
Average of Daily Transaction
Month

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct

IDX Composite
Market
Capitalization
(Rp Billion)

Numbers
of
Issuers

3.38%

4,382.40

488

4,620.22

4.56%

4,576.08

488

4,567.76

4,768.28

3.20%

4,717.50

489

4,933.11

4,721.60

4,840.15

1.51%

4,798.56

493

204

5,091.32

4,828.22

4,893.91

1.11%

4,855.60

494

5,028

179

4,971.95

4,835.04

4,878.58

-0.31%

4,840.51

496

6,480

7,379

221

5,165.42

4,862.42

5,088.80

4.31%

5,052.86

501

5,491

5,783

213

5,223.98

5,048.00

5,136.86

0.94%

5,108.51

501

5,794

5,978

210

5,262.57

5,082.73

5,137.58

0.01%

5,116.20

501

4,957

5,801

206

5,157.08

4,965.39

5,149.89

0.24%

5,071.32

501

Volume
(Rp
Million)

Value
(Rp
Billion)

3,904

(Frequency
thousand
times)

Highest

4,804

185

4,510.22

4,161.19

4,418.75

4,485

5,626

215

4,665.27

4,320.78

5,799

7,383

239

4,903.50

5,434

6,897

234

5,017

6,238

4,583

Close
Lowest

Close

change

(%)

Source: http://www.idx.co.id (Official website of Indonesia Stock Exchange)

According to the JCIs movement from December 2013, with close price 4,274.17, until
October 2014, there is an increasing 875.72 point or 20.49%. This means the bullish trend still
ongoing until end of 2014 and maybe in the next 2015. There were some up-down trends that
significantly affecting JCIs movements in the 2014.
Down-trend moments
According from table 3, the downtrend just happened in June 2014, down 0.31% or
-15.33 point from the previous month. There were some critical moments from this month,
including withdrawal from foreign investor and Iraqs crisis.
In 9 June 2014, selling action by foreign investors caused JCI down 1.05% or decreasing
52.09 point, 9 of 10 sectors in JCI were weakened. This weakening was happening a few days
ahead of the implementation of the 2014 World Cup in Brazil. Some analysts projecting a grand
event that will give effect to the stock movement. On the other hand, stock exchanges in the Asia
Pacific region rose as pouring a lot of positive sentiment. Foreign exchange with US Dollar
strengthens 0.71% and the other foreign index was on green position. This means the withdrawal
of funds by foreign investors correctly-proved.
Another moment happened in 12 June and 16 June 2014, which made JCI down 0.76% or
-37.53 point and down 0.84% or -41.04 point, respectively. The cause of this weakened because
of Iraq's crisis, Sunni rebels captured the Turkmen city in northwest Iraq yesterday after heavy
fighting. Fear of Iraq crisis spread to the region led to the stock market index in the Gulf region
slumped 5% after the preparation of the Iraqi government troops and mostly Shiite volunteers to
defend Baghdad and a number of oil fields from the invasion of ISIS, or Islamic State of Iraq and
al-Sham. On the other hand, crisis in Ukraine which also threatens the supply of gas to the
European Union. These global issues create anxiety in global stock markets, including in
Indonesia.
Up-trend moments
According from table 3, the significant uptrend happened in January, February, March,
and July. There were some critical moments from those months, including positive sentiment of
macroeconomic data, low inflation rate, Jokowis effect and the Indonesias president election.
Throughout January 2014, most of the Asian and global stock markets declined, such
NIKKEI dropped 8.45%, HSI dropped 8.14% and NASDAQ dropped 1.74%. In January and
February 2014, Analysts, PT. Buana Capital, Alfred Nainggolan, said the Indonesian stock
market gain positive sentiment of macroeconomic data. At the beginning of the year, the release
of annual inflation stood at 8.38%, this figure is below market predictions about 9%, beside of
that the Government said that the balance of trade surplus and foreign exchange reserves reached
US$ 99.38 billion as of December 2013. In line with the sentiment in the country, economic
improvement also occurred abroad, like Central Bank of America (USA) continued withdrawal
of monetary stimulus funds (tapering) of US$ 10 billion to US$ 65 billion. These issues made
perception of any improvement in the US economy, so that market participants are more

optimistic. Instead of that, Indonesia still becomes an interesting place for foreign investors. It
was seen from the benchmark interest rate of Bank Indonesia (BI) 7.5%, which this rate is still
higher than the rate in the US. It is evident from foreign investors who recorded a net buying or
net buy at the regular market of Rp1,933 billion in January 13, 2014, which JCI increased 135.8
point just in one day.
In March 2014, JCI increased 3.20% or 148.06 point because of inflation rate and
Jokowis effect. Analyst PT Trust Securities, said Reza Priyambada, at the level of inflation in
March 2014 was 0.08% below the inflation forecast in the range of 0.14% -0.20%, which the rate
of inflation year on year (March 2013-March 2014) reached 7.32%. This inflation rate indicates
that economic condition in Indonesia was improving than last year. On the other side, in March
2014, there was a Jokowis effect that made JCI became the highest stock exchange in Asia
pacific, while the others foreign index moved in the negative territory. Jokowi, now as the
President of Indonesia 2014-2019, officially declared himself as a candidate in the president
election 2014 in March 14, 2014 at 3 oclock. In that moment, one hour before market closing,
foreign investors suddenly recorded net buy at the regular market of Rp14, 476 billion.
In July 2014, JCI increased 4.31% or 210.22 point because of Indonesia president
election 2014. The election held on July 9, 2014, in these moment, from July 7 July 10, JCI
increased 192.19 point. The result of quick calculation with most of the surveys were showing
pairs of candidates for president and vice president of the sequence number two Joko Widodo
and Jusuf Kalla had provided power for JCI (another Jokowis effect). The rate of JCI moved
mighty even exceeds the level of 5,100. The quick calculation spurred foreign investors to buy
JCI and recorded the highest net buy at the regular market of Rp4, 197 billion just in one day, in
July 10, 2014. Here the table of Foreign Investors net buy and net sell in July 2014:
Table 4
Movement of Net Sell and Net Buy
Date
Net Buy(Bill) Net Sell (Bill) Date
Net Buy(Bill) Net Sell (Bill)
July 1
530
July 15
261
July 2
274
July 16
872
July 3
207
July 17
531
July 4
568
July 18
473
July 7
761
July 21
23
July 8
1,574
July 22
6
July 10
4,197
July 23
509
July 11
2,938
July 24
368
July 14
379
July 25
194
13,860 Bill
798 Bill
Total
Source: www.ojk.go.id/ the official website of Financial Services Authority

In Table 4, there are some significant net buy from foreign investors in July 7 July 11.
These significant net buy indicates that Jokowis effect become the trigger for the foreign
investors to buy the stocks.

Conclusion
According to the history, JCI made a bullish pattern that indicate increasing index in the
future, even the pattern is proved to be true in nowadays. Beside of the pattern, there are external
factors and internal factors that affect JCI. External factors like foreign exchange, especially
KLSE and Dow Jones, oil price make a significant affects to JCI, beside of that the internal
factors like inflation and interest rate SBI not really significant to affect JCI. In the other hand,
foreign investors have a significant role for liquidity market of JCI.
JCI in 2014 was affected by some up-down trends. The down-trend including withdrawal
from foreign investor because of Iraqs crisis. The up-trends including positive sentiment of
macroeconomic data, low inflation rate, Jokowis effect and the Indonesias president election.
This conclusion mean in 2014, foreign investors still have a significant role for liquidity market
balance.
Implication
For investors who would conduct investment transactions in Indonesia Stock Exchange
one consideration is the view of the foreign stock indices and stock indices in the region, such as
Malaysia and Hong Kong. The result of the research indicates that foreign stock market made the
greatest influence on JCIs movement. Another consideration is the high ownership of foreign
investors must be an alert for local investors, if the foreign investors want to withdraw their
investment on JCI in a big amount.

References:
http://www.batan.go.id/psjmn/?p=831
http://www.bapepam.go.id/pasar_modal/publikasi_pm/statistik_pm/2012/2012_IX_4.pdf
http://www.idx.co.id
www.ojk.go.id/
http://www.duniainvestasi.com/bei/prices/stock/COMPOSITE
http://bisniskeuangan.kompas.com/read/2014/06/09/1636372/Lesu.Jelang.Piala.Dunia.IHSG.Aw
al.Pekan.Ditutup.Turun.52.Poin
http://news.bisnis.com/read/20140616/19/236220/krisis-irak-turkmen-jatuh-ke-tanganpemberontak-isil
http://indo.wsj.com/posts/2014/06/16/krisis-irak-tingkatkan-suhu-politik-timur-tengah/
http://bisnis.liputan6.com/read/2076016/investor-asing-borong-saham-ihsg-naik-73-poin
http://www.eddyelly.com/2014/08/investor-asing-net-buy-dan-net-sell.html
Mauliano, Deddy Azhar. 2009. Analisis Faktor-Faktor yang Mempengaruhi Pergerakan Indeks
Harga Saham Gabungan (IHSG) di Bursa Efek Indonesia. Fakultas Ekonomi, Universitas
Gunadarma.